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S&P 500 Trend Analysis - 10/28/2011

|Includes:SPDR S&P 500 Trust ETF (SPY)
It was an up week for the major markets. For the week, the Dow Jones Industrial Average gained 422.32 points or 3.58%, while the NASDAQ Composite gained 99.69 points or 3.78%.

The Standard & Poor's 500 Index gained 46.84 points or 3.78%, and closed at 1285.09 on Friday, October 28, 2011. It was a fourth consecutive positive week for the S&P 500 (^GSPC). Weekly volume was 7% above the average. Read More ...

In our previous publication on September 5th we suggested the following:

"Usually when the price moves below 200 day Moving Average, the next up wave at least retests the 200 day MA as a new resistance level. The Bullish rally usually breaks this resistance level and the price moves above the 200 day MA level. S&P 500 index may break the support around 1100 and move down to the next support area around 1000 - 950."

On October 4th S&P 500 index indeed broke the 1100 support level and made a new low at 1074.77. After making a new low, S&P recovered and closed above the support level. On October 4th the first down wave that has started on May 2nd 2011 at 1370.58 has been completed. It had a five wave's structure (See Figure bellow).

 
 
S&P 500 long-term trend
Technical Stock Market Timing System
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The rally that had started on October 4th reached 1292.66 on October 27th. It has broken the 200 day Moving Average (1274.24) and retraced 73% of the previous down wave.

The S&P 500 daily Lane's Stochastic (%D-Slow) is overbought, while the Williams' Percentage Range (W%R) is strongly overbought.

More than 86% of the S&P members have overbought daily Williams' Percentage Range indicator (See details) and 55% are strongly overbought (See details). The Lane's stochastic indicator is overbought for more than 50% of S&P members (See details). During the last week, daily Lane's stochastic main line (%K) has declined below the overbought signal line (%D) for almost 20% of the S&P members (See details). Such crossover is considered a bearish signal.

More than 40% of S&P 500 members have the Downtrend Resistance Alert (See details) and more than 28% have the Downtrend Broken Resistance alert (See details). Dow Jones Industrial Average and NASDAQ Composite indices have the Downtrend Resistance Alert.

During the week, the 16 members of the S&P had Buying Climax signal (See details). A buying climax happens when a stock makes a new 52 week high, but the weekly price closes below the previous week's close. The Buying Climax is often considered an exit signal.

All the above technical indicators suggest that S&P 500 index is near a strong resistance area. The rally may reverse or pause soon.
 
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Stocks: SPY